Explore the key factors that could cause Cardano’s price to drop to $0.2. Understand the potential outcomes based on current technical indicators and trendlines.
Cardano price has had a strong run in the past two weeks, surging from a low of $0.3 to $0.36. The long bottom line of last week’s candlestick chart shows that bulls are in control of the market and have continued to buy this week. However, despite the gains, macro technical analysis shows that ADA’s price is still at risk of falling to $0.2. Can bulls avoid this crash?
Reasons why Cardano price may plummet
The Cardano network has been trying to stay ahead of the curve, but the project has been heavily criticized by most of the crypto community for taking too long to make substantial moves. Some of the reasons why the ADA price could drop to $0.2 include:
Increased transactions per session (TPS) while reducing the number of transactions.
The total value locked has continued to decline since the March 2024 high.
Stagnant network density leads to fewer daily active users
1. TPS soars, usage drops
A deeper look into Cardano network activity reveals that while the blockchain has built the ability to scale and handle large numbers of users, it still needs help attracting users. According to Cexplorer, Cardano TPS has been increasing, but the number of transactions has been decreasing, which seems counterintuitive.
The divergence of these two metrics indicates a decrease in network activity, which is negative for Cardano price. While the network itself may be perfect, users may lose momentum due to cryptocurrency market conditions or other external events.
If TPS is low, a long transaction queue may give the impression that the network has a high number of transactions. However, if TPS increases, there are few to no lagging transactions, which can help provide a clearer picture of whether the network has users.
2. Cardano TVL is steadily decreasing
Cardano TVL has been steadily declining since the highs of the mini-bull run in March 2024. The surge in TVL at the time was expected as new users were likely to enter the market following the approval of a Bitcoin ETF. However, Cardano was unable to maintain its users during the subsequent market correction.
TVL dropped from $490 million in March to $181 million in August, indicating that investors are slowly withdrawing funds from the Cardano ecosystem.
3. Daily active users decline as network capacity increases
In 2024, Cardano network capacity has grown, meaning the blockchain can handle a large number of users, as shown by the increase in TPS. Another metric is network capacity (red), which has been steadily increasing, solidifying Cardano’s position as a strong network. However, the actual network capacity used (green) has been decreasing, indicating less demand for the network and the underlying assets.
Negative on-chain indicators foreshadow a drop in Cardano price
ADA price has been trending down since March 2024. As can be seen in the chart below, the asset is firmly below its 21-day exponential moving average, reinforcing the bearish outlook.
While the crypto-asset has enjoyed a couple of good weeks, a strong descending trendline is acting as a strong resistance to the price. If the price of Cardano fails to break above this trendline, the asset could drop by 32% to $0.2. This would also coincide with the profit target of a multi-month-long double top bearish reversal pattern on the weekly chart.
On the other hand, if Cardano breaks above the trendline, it would indicate extreme market strength that could push the asset back to $0.50, where the next important resistance lies. A breakout above this resistance could see ADA surge to $0.70.
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